This paper sheds empirical light on whether sentiment affects the profitability of price momentum strategies. We hypothesize that news that contradicts investors' sentiment causes cognitive dissonance, which slows the diffusion of signals that oppose the direction of sentiment. This phenomenon...

We ask to what extent task knowledge and tactics, or enduring personality traits, predict behaviour and biases in a stock trading setting. We base our study on an exceptionally wide-ranging dataset: responses to a self-report survey, together with transactional data of the same individual...

We use a large dataset of individual investor stock trades to demonstrate that investors are more likely to sell stocks with larger price changes in the previous day. This is consistent with investors trying to learn about the firms' fundamentals from stock returns. Our core contribution is to...

We design an experiment to test the hypothesis that, in violation of Bayes Rule, some people respond more forcefully to the strength of information than to its weight. We provide incentives to motivate effort, use naturally occurring information, and control for risk attitude. We find that the...

The propensity of households to invest in stocks is lower than implied by Expected Utility Theory. One explanation suggested in the literature is that stocks entail ambiguity and investors are ambiguity averse. We test this hypothesis, measuring participation using equity fund flows and...

The security market line (SML) accords with the capital asset pricing model (CAPM) by taking on an upward slope in pessimistic sentiment periods, but is downward sloping during optimistic periods. We hypothesize that this finding obtains because periods of optimism attract equity investment by...